The Wal-Mart Equation

Contract talks with Southern Californias major supermarket chains are going nowhere,and the regions grocery workers could be on strike by October 11, the unions top official said this week. At issue are what United Food and Commercial Workers (UFCW) Local 770 president Rick Icaza calls managements unprecedented proposals to cut back on health benefits, and the looming shadow of the worlds largest grocer  nonunion Wal-Mart.

It would be the first large-scale supermarket strike in Los Angeles County since 1978. But an angry Icaza, on a break from bargaining talks, said he saw little alternative to a strike vote next Wednesday in view of the roster of more than 50 concessions that negotiators for Ralphs, Vons and Albertsons were demanding. The national chains are insisting that union workers pay health-insurance premiums for themselves and their family members for the first time in more than 50 years. Icaza said they also were seeking to impose a two-tier salary system that would give substantially lower pay and benefits to new workers through their first four years of employment.

Unless a miracle happens theres going to be a strike, Icaza said.

More than 30,000 grocery workers in Los Angeles County would be affected, plus another 41,000 in counties from San Diego to San Luis Obispo. Another 10,000 drivers and warehouse workers who belong to the International Brotherhood of Teamsters Joint Council 42 may honor the picket lines while staying on the job.

UFCW members at smaller chains, like Gelsons and Stater Bros., would remain at work, and those stores would be unaffected by the strike. Stater Bros. has signed a me too agreement, meaning it will abide by whatever contract is reached by the union and the big three chains, but will not participate in bargaining.

The current four-year contract expires Sunday.

Albertsons spokeswoman Stacia Levenfeld acknowledged that the parties remain at loggerheads on all significant issues. She said that in the four years since the current contract was signed, The cost of health care for employers has increased significantly, over 50 percent. Supermarkets will continue to offer generous benefits, Levenfeld said, but must make adjustments to account for increasing costs.

Levenfeld said her company has begun hiring replacement workers and is preparing to pull in employees from other parts of the country to assure that no stores close during the strike.

As recently as July the UFCW and representatives of the major chains were appearing side-by-side at public hearings in Los Angeles to support a proposal to severely restrict the ability of big-box discounters like Wal-Mart to sell groceries in town. No one from Ralphs, Vons or Albertsons went quite as far as George Frahm of Stater Bros., who told an assembly of cheering UFCW workers and silent, blue-vested Wal-Mart associates that his chain was proud that its workers earned enough to be able to buy houses where they worked. But for a brief period this summer, management and labor saw their biggest threat in Wal-Mart and not in each other.

According to a May report in The Wall Street Journal, 25 regional supermarket chains around the country filed for bankruptcy in the last decade due to Wal-Marts expansion into the food business. The Bentonville, Arkansas, retail giant moved into the grocery game in 1988, opening Supercenters to sell fresh and packaged food at 10 to 20 percent less than the national chains. Last year Wal-Mart surpassed Cincinnati-based Kroger Co., owner of Ralphs and Food 4 Less, to become the largest seller of groceries in the nation  and the world.

Current trends would put three-quarters of all Kroger and Albertsons stores around the country within 10 miles of a Wal-Mart Supercenter, according to The Wall Street Journal. To keep up with Wal-Mart, Kroger reportedly slashed prices nationwide, but it has to make up for that lost income somewhere. The owners of Ralphs, like the owners of Albertsons and Vons, are trying to trim their labor costs.

UFCW grocery-store workers in Southern California start out at the minimum wage of $6.75 an hour for beginning baggers. Meat cutters top out at $19.18. The union is asking for a 50-cent raise in the first year of a new contract, to be followed by 45 cents each of the next two years.

Wal-Mart does not publicly discuss wages, which vary across the country. Wal-Mart spokesman Peter Kanelos said no employee, or associate, in company parlance, earns as little as the minimum wage. Court records in a discrimination lawsuit put average Wal-Mart pay at $8.23 an hour in 2001. A story in Tuesdays Wall Street Journal reported that new hires must wait six months to sign up for benefits and that the company doesnt pay for many shots or other standard treatments.

There are no Wal-Mart Supercenters in California, although Los Angeles growing crop of traditional Wal-Marts sells convenience foods that can range from chips and soda pop at the Porter Ranch store to milk, bagged vegetables, frozen dinners and bread at the massive, three-story Wal-Mart at the Baldwin HillsCrenshaw Mall.

But Supercenters are coming. Last year Wal-Mart announced plans to open 40 Supercenters in California, and the first is slated to open early next year in La Quinta. Others are coming soon in Palm Springs, Palm Desert and Calexico, according to Kanelos.

The threat of a Supercenter at a site in Inglewood near Hollywood Park and the Forum moved UFCW to press city officials for an ordinance restricting grocery sales there. The ordinance passed but was later rescinded, and Wal-Mart has now gathered signatures for a March ballot measure that effectively would bar the city from ever again legislating over what the company can and cannot do in town.

Now Los Angeles is preparing a similar ordinance. It would permit big-box retailers like Wal-Mart to sell groceries  but only if they pay their workers prevailing wages and medical benefits for dependents as well as associates. Nothing about Wal-Marts history or corporate culture suggests the company would ever agree to such restrictions.

The whole competitive landscape has changed, Levenfeld said.

Icaza said that in contract talks under way now between UFCW and the three major chains, management has not named Wal-Mart as a threat, but repeatedly says the stores must remain competitive. The term can be interpreted as meaning low labor costs either to maximize the companies stock price on Wall Street, or to compete with future Wal-Mart Superstores in L.A.  or both.

Every proposal they bring forward, they say they want to be competitive, Icaza said. I guess that means whatever model Wal-Mart has for medical care were now supposed to accept. I said to them, Did Wal-Mart help you prepare these proposals? I think theyre using Wal-Mart as an excuse.

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